By Jamie McGeever
LONDON, Sept 23 (Reuters) - The U.S., German and British governments are finding it harder to sell super-long bonds than at any time in almost a decade as meagre yields deter investors and new regulation bites into banks' ability to broker this debt.
The end of an almost 30-year bull market in bonds has been called several times in recent years only for forecasters to be confounded by factors from weak economic growth and chronically low inflation to demographics and financial reforms.
But analysis of government bond auctions this year shows demand from market makers - typically investment banks who later sell the bonds to institutional investors like pension and insurance funds - has been steadily ebbing.
All six auctions of the German bond maturing in August 2046 have been technical "fails", meaning the sum of bids has not matched the amount on offer. It's the first time since the German finance agency began compiling comparable records in 2007 that every auction of a single bond or bill has failed.
In Britain the "bid-to-cover" ratio for 30-year auctions, which measures the degree to which demand exceeds the quantity of bonds on offer, is lower in the current financial year than any year since the 2008 crisis.
And the bid-to-cover ratio of the last six U.S. long bond auctions is below long-term averages over the period since the reintroduction of the 30-year bond almost a decade ago.
U.S. Treasury data released on Tuesday showed that foreigners bought the fewest 30-year bonds at an auction in early September since March 2010, taking up only $752 million of the $13 billion it offered.
"Banks' balance sheets are constrained. Putting money towards auctions requires capital, and in this world of constraints it's more difficult for banks to do so," said Anthony O'Brien, co-head of European rates strategy at Morgan Stanley.
"Perhaps the days of dealers taking large sizes of auctions are behind us," he said.
WINDOW CLOSING
Primary dealers, who are almost exclusively big banks, show up at government bond sales, buy the assets, then sell them to mostly long-term investors. But with new rules limiting how much inventory banks can hold, they are buying less at the auctions.
In the wake of the global financial crisis the Basel Committee on Banking Supervision agreed a global regulatory framework on bank capital adequacy, stress testing and market liquidity risk known as Basel III.
It will be fully in force in 2019, but already many banks are complying with a minimum 'leverage ratio' on their non-risk weighted assets for the first time, meaning they now hold more capital against all assets on their balance sheet. Banks say this has made them less able and willing to hold large inventories of bonds bought at auction for any length of time.